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Anti-Corruption

Malaysia: Extra Territorial Effect of New Corporate Liability for Corruption Offences

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In brief

The new corporate liability provision under Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (“Section 17A“) has come into force on 1 June 2020. As highlighted in our earlier client alert (see Link), a company may be held criminally liable under this new provision for acts of bribery committed by its directors, employees or other associated persons.  The only defence available is for the company to prove that it has put in place adequate procedures designed to prevent these corrupt acts.

This new corporate liability provision applies not only to Malaysian companies, but also to foreign companies with businesses in Malaysia.

Contents

Impact on Foreign Companies

The new Section 17A applies to all foreign companies and partnerships which carry on businesses in Malaysia. Although the Act is silent as to what amounts to “carrying out business” in Malaysia, it is likely that a foreign entity will fall within the ambit of Section 17A if it carries on business in Malaysia through an agent or intermediary such as a distributor or reseller and/or through a subsidiary.

The following are examples of two scenarios where a foreign company may be exposed to liability under Section 17A:

  1. Foreign company’s employees or agents pay a bribe in Malaysia

A foreign company may be liable for an offence under Section 17A of the Act if its employees, agents or persons associated with it bribes or attempts to give a bribe in Malaysia to obtain or retain business or business advantage for the company.

  1. Foreign company’s subsidiary pays a bribe in Malaysia

A foreign company may also be liable if its subsidiary bribes or attempts to give a bribe in Malaysia to obtain or retain business or business advantage. This is illustrated in the first prosecution under the UK Bribery Act 2020 in the case of R v Sweett Group plc (“Sweett“) (unreported)(2015), whereby a subsidiary of Sweett paid a bribe in the Middle East to secure a project. Notwithstanding that, the subsidiary engaged in the bribery without the involvement or knowledge of its parent company and that the contract was awarded to the subsidiary, the judge took into account the fact that the subsidiary was not autonomous but was effectively operated by Sweett as a division in the Middle East.

For completeness, we wish to highlight that liability may not accrue through simple corporate ownership or investment, or through the payment of dividends or provision of loans by a subsidiary to its parents. The degree of control of the Malaysian subsidiary will be a relevant factor whether liability is extended to a foreign holding company under Section 17A.

Action to consider

The penalties arising from liability under Section 17A is a fine not less than 10 times the value of the bribe or MYR 1 million (whichever is higher) and/or imprisonment of a term not exceeding 20 years.

In light of this, foreign companies with businesses in Malaysia should take steps to assess their risk and to consider putting in place the required adequate procedures which is the only defence available for corporates arising from liability under Section 17A. Please refer to our previous client alert here on how to comply with the requisite adequate procedures under Section 17A.

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Author

Kherk Ying Chew heads the Intellectual Property and Dispute Resolution Practice Groups of Wong & Partners. She has decades of experience in IP, commercial litigation, corporate compliance, information technology and Internet regulatory issues. Ms. Chew has been named among the Commended External Counsels of the Year 2017 by the In-House Community. She is also one of two Malaysians ranked in Top 250 Women in IP 2017 by Managing IP. She is ranked in the first tier of IP practitioners in Malaysia by Chambers Asia and Asia Pacific Legal 500. According to Chambers Asia Pacific, Ms. Chew is "an acclaimed figure in the sector, drawing praise as a lawyer who is 'really commercial, very practical' and 'knows her subject impressively well'". Asia Pacific Legal 500 had previously commented that she is "highly respected for contentious and non-contentious work" and has won "an important precedent-setting case for Malaysian software copyright law.”

Author

Eddie Chuah is a partner with the Dispute Resolution Practice Group, with more than eight years of experience in all aspects of civil litigation, arbitration, industrial relations disputes and compliance. Mr. Chuah has undertaken a wide variety of briefs involving substantive law issues ranging from complex commercial transactions, insolvency litigation, shareholder disputes, construction, employment and administrative law. He also focuses on compliance issues, in particular, anti-corruption investigation, government procurement, audit and prevention.

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